Do you have an Emrgency Fund?

Financial experts generally agree you should keep an emergency fund of 3-5 months of living expenses in a savings account, certificate account, or investment account. Having these funds accessible can be the difference between a temporary hardship and a life-long debt trap.

There are many reasons why you might need to use that money. It could be from an unexpected expense, like a medical bill or a car repair. It could also be job loss that forces you to tap out your savings. Whatever the cause, it’s a whole lot cheaper to pay for it out of savings than to have to borrow, and it’s much less embarrassing than having to beg friends or family to cover your bills.

Make an emergency budget – and stick to it! Without an emergency fund, you’re one blown tire, one missed shift or one broken arm away from a financial catastrophe. That’s why an emergency fund is so important. Cut spending wherever you can. If you can do without cable for a few months, call and suspend service. Temporarily cutting back on media, clothes, and other discretionary spending even selling old items or items you no longer use that are taking up space can give you a little extra cash.

If you're just starting out, start small. If you try and change your spending habits drastically, its harder to maintain. Determine a starting point that's comfortable and grow your commitment every 1-3 months until you're contributing a healthy level (example: $10 a paycheck or 5% and work your way up from there)

For more information on starting an emergency fund, consolidating debts, starting a budget, or other related financial advice you can review our resources throughout the MembersAlliance website or ask our financial service professionals directly.

 

Have you checked your credit report lately? It might not be a bad idea.

Your credit report/credit score is a powerful indicator of your ability to manage and pay your bills that is used by a variety of people, from landlords, to insurance companies, potential employers, and of course primarily lenders. It can affect your ability to be approved in signing a lease for the apartment you want, what premiums you pay on insurance, whether your hired for your dream job or just your next job, and of course whether you’re able to borrow money.

What lenders see when reviewing your credit report and credit score may not only determine whether or not to approve a loan for that home, car, or appliance purchase, or credit card approval, but also HOW MUCH you have to pay for those purchases. The lower the score, the higher the interest rate, the more you pay. This can add to hundreds, thousands, even tens of thousands over a matter of a few years!

So most importantly, how do you check your credit report? You’re entitled to an annual credit report from each of the three major credit reporting agencies. Order yours at www.annualcreditreport.com.

If you notice any discrepancies you can dispute those and have them corrected for all three credit bureaus right on the site. It is estimated over 20% (1 in 5) of people have errors on their credit report.

Here’s a few quick tips to improve or help protect your credit score:

  1. Pay your bills on time and consider automatic payments. If you find keeping track of due dates to be a challenge and would prefer one less thing to worry about, consider signing up for automatic payments. Paying your bills on time is one of the biggest factors credit bureaus use in calculating your score. Late payments can absolutely ruin an otherwise healthy credit score.
  2. Pay more than just the minimum payment on your credit cards and pay your credit card bills before they’re due. You will pay down your debts faster, pay less interest. The less you owe, the better of course, but the quicker you pay down debts, especially revolving debts, such as credit cards, the stronger your credit score.
  3. Take steps toward fixing your credit. Look to make past due loans and credit cards on time (if you speak with your lender they may help with setting up a repayment plan and begin reporting you as on time with the credit bureaus).
  4. Report possible fraud immediately. That ranges from lost or stolen debit/credit cards to falsely opened accounts or other forms of identity theft. The sooner you report the fraud the easier it is the get it cleared up.
  5. Ask us for help. If you have questions, we’re here to help. If your debt has become unmanageable, consider debt consolidation. We can probably help with that too.

How long should you finance your vehicle? Consider a number of factors before finalizing your purchase.

There is no predetermined answer to this question as everyone’s situation is different. That being said, you should know what you’re comfortable paying (not just as a monthly payment but overall for a vehicle), the type of vehicle you want, what features are important to you, and don’t be pressured into something you can’t afford or don’t want. If you’ve done your research and don’t overspend, you’ll likely have more equity built up when it comes time to get another car.

A quick Google search (10-2019) will tell you that the average terms on car loans are at all-time highs with new cars averaging 69 months and used cars averaging 65 months!

When making a vehicle purchase, it’s smart to consider not just thing such as fuel economy, reliability, and available technology, but also the practical use for your needs. Additional features on vehicles today are amazing and have the ability to make our lives easier. Just remember: the more features it has the more it will cost. If you’re limited on the amount you can put down at the time of purchase, you will be financing more likely making not just your payment higher but the term of your loan longer to keep the payments affordable. Limiting features to what you need, and keeping in mind your practical use of the vehicle when making your purchase can bring down the cost and keep it from becoming a strain on your wallet.

It’s also important to consider whether or not your vehicle may be not be worth what you owe on it at some point during your repayment term. If that may be true, which your lender should actually be able to forecast for you, you should strongly consider GAP insurance. If you were to be in an accident and your vehicle was totaled GAP, or Guaranteed Asset Protection, covers the difference of what your auto insurance company will pay (usually only the current value of the vehicle) vs. what is owed, covering the GAP in coverage.

If you have any questions about your next auto purchase, want to determine what you can afford are ready to get pre-approved, or you’re paying too much for your current auto loan, let us know…we can help. Just call, click, or stop in!

 

Does your company offer a retirement plan (401k, pension, etc.)? If so, are you contributing to it?

A 401(k) program is a retirement account named for the section of the tax code governing it (section 401(k)). It is an alternative to traditional pension plans that puts the responsibility of saving for retirement on the shoulders of the employee. Instead of the company holding a pension fund and paying retired employees each month, employees make contributions to a tax-deferred account they can invest in stocks, mutual funds and other instruments. Once they retire, they can start taking money out of the account to pay for living expenses.

The account is “tax-deferred” – meaning contributions get subtracted from your taxable income. Withdrawals are taxed as ordinary income. For people in their peak earning years, this usually results in a considerable tax savings.

Many employers also include special incentives for contributing. They may provide “matching” funds, where the company will match an employee’s contribution dollar-for-dollar, up to a percentage of the employee’s income. For instance, if you make $50,000 per year and your employer offers 3% matching funds, they will contribute up to $1,500 that year if you are putting in at least 3% yourself. If you’re not, often they will not either, so you are essentially missing out on “free” money.

If your company does not have a 401(k) plan, pension plan, or other type of qualified retirement plan, or you’re self-employed, consider opening an IRA (Individual Retirement Account) with your local credit union to begin saving for retirement and at least save a little more through the established tax benefits of contributing to IRAs.

If you’d like information on IRAs or have general questions, let us know. We’re here to help! Just call, click, or stop in!

 

What's the difference between debit and credit?

A debit card is a card linked directly to your checking account. It can be used to make purchases, withdraw cash from an ATM, or even pay bills online or over the phone. It is typically a VISA or MasterCard, occasionally Discover, but is always linked to a checking account where funds from the purchase, withdrawal, or bill payment are taken from. You should make sure you know what is in your account before using your debit card for purchases.

A credit card looks very much the same and can be used for similar uses but the money itself comes from a predetermined limit available to you to borrow against. It may be $500, $1000, $2000, $5000 or more. A credit card is a loan and is derived from receiving credit. It is borrowed money that must be repaid. It is used in the same sense when talking about your credit report, credit bureaus, or your credit score.

When making purchases, what’s the difference?

This more based on how the transaction is processed. If using a credit card the transaction must be processed as a credit transaction. If it is a debit card, the transaction may be processed as a debit transaction or a credit transaction.

It’s important to understand regardless of how it is processed, when you use your debit card, the funds will come out of your checking account. A debit transaction simply requires a PIN (Personal Identification Number) to complete whereas a credit transaction requires a signature or the retailer’s acceptance the transaction is valid (if they do not require a signature).

Debits and Credit to your account

This terminology is accounting based when balancing accounts and you may hear something like “you’ve received a credit to your account”. A credit simply means an addition of funds to your account, while a debit transaction is a withdrawal. This is where the name debit card was derived as the purchases are withdrawals from your account.

If you have more questions or would like additional information, we can help!